 Welcome to the nonprofit show and happy Monday or I like to say happy Monday because Friday gets all the fun, but really Monday deserves some to you. So Julia Patrick and I are excited to have with us today. Victoria Beck and Victoria serves as general counsel regulatory compliance at easy ERC Victoria we met in Nashville and I'm so glad that we have you here for the show so excited for your conversation to bring to us today nonprofits and the employee retention credit or as we will probably refer to it ERC. So stay with us to hear more from Victoria. Julia Patrick hello to you hope you're having a fantastic day. Julia is the CEO of the American nonprofit Academy, and I'm Jared ransom your nonprofit nerd and CEO of the Raven group. We are honored to have the continued support whether we dress up or don't dress up for Halloween as we were just talking about from our amazing friends. Our goals and ghost as we might call them over at bloom rang American nonprofit Academy, your part time controller nonprofit thought leader fundraising Academy at National University. Also thank you to staffing boutique nonprofit nerd as well as nonprofit tech talk. These companies in fact most of them, I believe Julia have been with us for this entirety. Academy has been amazing 900 plus episodes and you can find all of them on these platforms so you can scan the QR code right now with your smartphone and download the nonprofit show app you can also still hear us on podcast, as well as broadcast platform so pretty much anywhere. If you stream and get your entertainment you can stream and listen to the nonprofit show, including our conversation right here right now with Victoria back this episode live so I'm so glad that many of you are joining us for this conversation, but it will go into the various topics that you can listen to it later on today. So welcome Victoria we are excited to have you for those watching and listening again. Victoria is general counsel and regulatory compliance at easy ERC welcome to you. Thank you Jared pleasure to be here. Yeah, well tell us a little bit about yourself a little bit about easy ERC and the nonprofit space. Sure. So, I'm an attorney been practicing for over 10 years, and I serve as general counsel at easy ERC. We focus on assisting nonprofits and for profit businesses with their filing of the employer retention credit. Wow, very important. Yeah, it's it's it's incredibly important and we were talking about this. Kind of before we got started about the employee retention credit, Jared brought up a really good point. It's like, well, wait, isn't all this over. And could you kind of like walk us through what this is meant to do, and maybe like the life cycle of this program because it has it has never been done in our country before correct. So it was a similar program that was rolled out with the Katrina legislation, which was quite some time ago if you recall. But yeah, we can we can certainly get into it and just generally talk about you see the slide here what isn't the employer retention credit so the employer retention credit sometimes referred to as the employee retention tax credit is it's a credit it was a program that was rolled out back in March of 2020 as part of the cares act. It was to serve as sort of a reward for employers who kept employees on during the pandemic when they experienced either a decline in revenue or operational impacts. What is the life cycle for so you thought you file your for your credits quarterly depending on what quarters you're you're eligible for, and the 2020 quarters. The program expires for those on April 15 of 2024 so coming up, and then for the 2021 credits that expires April 15 of 2025. And the life cycle of the program so the eligible the quarters that you could be found eligible run from March 13 of 2020 through September 30 of 2021. Wow, that this is the first time I've heard a deadline. Yeah. Yeah. Also in relationship to the payroll quarters. I mean, the fun that's fascinating it makes sense right. But that helps a lot to kind of demystify why this is a rolling thing it's what I hear you saying it's not like a hard start and hard stop I mean ultimately will cycle through that period of time but it's going to go all the way with the last quarters will they will they be filed into 2025. The last date of file for the 2021 quarters will be that April 15 state in 2025. And will there be 2022 opportunities or did this just run through that the payrolls of 2021. That's right it runs through the end of quarter three of 2021. Okay, so that's really that window that we need to be looking at when we have this conversation. And you can sort of think of it as a sort of a rebate on the wages that you paid during the relevant quarters or during the quarters that you're eligible. And you know the credits issued as checks from the IRS and there's there are no parameters as to how you can apply those funds so you know for nonprofits it's really a wonderful opportunity to sort of inject some funding some cash back into their streaming and their services and just really have another opportunity to serve the communities that they work with. Yeah, so is it different the ease the I want to say the easy ERC is the ERC different for nonprofits as it is for the for profit agencies and I'm curious like, what are some of these nuances because as we have so many, you know, global listeners you know in the nonprofit sector I'm sure some of them are thinking, oh my gosh, I thought our time had passed I thought that I had let this slip by, but maybe we do want to take a look at this because, you know we have talked truly earlier with other guests talking about how donations have decreased, how volunteers have decreased. So maybe while nonprofits that didn't take advantage of the ERC earlier they're now thinking, maybe we should so how does this work within our sector in particular that we need to be aware of. So that's a great question because at our firm we've worked with many nonprofits it's one of our focuses and we hear a lot of misconceptions in the nonprofit sector about the ERC. And I would say the first and biggest one is that a lot of nonprofits think that they're just not eligible that the ERC doesn't apply to them it only applies to for profit businesses but that's not the case. The Harris Act explicitly states that 501C3s are eligible for the ERC, and they qualify in the same ways that a for profit business qualifies and I'll get we can get into that, perhaps a little bit later in the conversation about there's really two pretty clear routes to eligibility for nonprofit organizations and for profit businesses alike. So that's one big misconception I hear with nonprofits. There are also some hard and fast rules around the size. So, in order to qualify for the ERC for the 2020 quarters, you have to look at your full time employee count in 2019. And if it's under 100 employees, then you can qualify for the 2020 quarters and then the 2021 credit for that the threshold raises from 100 employees to 500 employees. So that's important to think about because a lot of nonprofits might think well I think maybe we're too big for the credit but you know those are those are the rules around that. And also a lot of nonprofits think that they might not qualify because they didn't have a revenue decline you know you mentioned giving a minute ago giving was actually not that hard hit during the pandemic which is actually a wonderful statistic when you think about it. And so you know oftentimes giving perhaps other grant funding came into play and affected revenues in such a way that it didn't really tell the story as to how nonprofits experienced impacts during the pandemic, when they may have been quite significant, but just looking at you know numbers on a sheet isn't isn't going to show it. Yeah, because there's not just the revenue decline Congress put in place this other subjective legal test that just talks about the changes the operational changes that nonprofits had to make. And that's one of the roots to eligibility for them. Well one of the things I shared with you in the green room was you know I was working with an organization they decided to go through and work with someone on an ERC kind of you know tax credit rebate or, you know what not, and then they decided no we're not going to go through with it and file it so what are you talking about timeline for this you know once someone maybe contacts you and your team. What does that timeline look like for the you know for it to become filed and then for that money to say yay or nay and here's here's what you're getting back what is the timeline for this. It really depends it can depend on the organization and how quickly they're able to get you know the relevant accounting documents payroll payroll information that sort of thing over to our team. And then it can it can move relatively quickly once they get it over to us but then of course you know what we find oftentimes that nonprofits are quite risk averse because you know you're beholden to your donors and also to you have a board of directors that has their own fiduciary responsibility so you know and sometimes we have nonprofits they have their own CPAs they have their own counsel and everybody really is really important that everybody comes together and gets comfortable before filing the credit so you know like I said once we get all the documentation that we need it can move relatively quickly but then it's really important that everybody signs off so sometimes we have to have additional meetings when it comes to nonprofits just because they're just more people that that really is to get their blessing before we get that credit filed. Victoria I'm curious if you can talk to us numbers and I don't want you to tell us what organization right but like what are some of the tax credit rebates whatnot that you've seen come through successfully. Good question. So yeah that's a great question because the credit sizes can really be quite significant and quite meaningful. You know I just one comes to mind I won't mention a name but it was a fantastic nonprofit organization we worked with in San Francisco that provided services to children and families they did child care. They provided services to children with disabilities and they had a big connection with schools and schools were quite restricted during the pandemic especially in California, further into the pandemic than some other states. So their operational changes and impacts were quite significant, and I believe it's escaping me now but it was, I believe is somewhere between three and $4 million is what they received in their credit. Yeah so I mean truly I just want to stress that if there's an organization listening that thinks they're eligible is just this is really something that's worth looking into at the very least. Right. Oh my gosh can you imagine like what would you do with three to four million and and that also tells me that's probably a larger operational budget anyway that they're a larger organization. But even for some smaller organizations you know like when we're looking at revenue and diversification of revenue. We need to take this time because Victoria you told us a deadline earlier and that is coming. I feel like it's going to be here soon so you have to take advantage. Yeah, absolutely. It's it's coming up quickly and like I said there's still a little more time for the 2021 credit and actually the majority of the credit does live in 2021. So that is that's a little heartening but you know that 2020 credit limit is certainly coming up quickly. And Victoria the process I've got to believe remains the same so if you get through it once and you understand like what you have to do and all that that you'll it'll be easier for everybody to navigate that next year. Correct. I mean. Yeah, I mean there's no restriction on when you can file for the 2021 credit necessarily don't have to wait until next year so so if you're finding yourself eligible and you want to file for the credit you would file for all of the credit of the quarters where you believe you're eligible 2020 and 2021 at the same time now so really it's just one exercise. And it should be. Yeah, so. And you know that like I mentioned before I think this might be an important time to discuss the two paths for eligibility and oftentimes the first pass is the significant decline in gross receipts that's a revenue financial statement based test. Oftentimes we find that nonprofits don't qualify under that test. You know just so the information is out there. We're looking at a 50% decline in gross receipts in for the 2020 quarters compared to your 2019 quarters and then a 20% decline in gross receipts for your 2021 quarters as compared to 2019. But if you didn't have that revenue decline. The other route because Congress I think understanding that you know revenues don't always tell the whole story right so they put this other route in place it's a it's a subjective legal test. And it really just has to do with the changes that nonprofits had to make to their operations to comply with governmental orders that were put in place by the governor so things that were mandating. Social distancing, you know capacity limitations restrictions on schools court closures. You know these are some we worked with nonprofits that do advocacy work. The court closures created a huge impact there. You know, nonprofits that work with the unhoused population, you know, social distancing would have impacted that in a huge way if they're providing residential services for, you know, whether it be on housed people or people in a substance abuse program. You know oftentimes there was a big restriction there on how many individuals they could service just to make sure that they were complying with social distancing and capacity limitations. So if you can show that because of those impacts you experienced a 10% reduction in your ability to provide those services, then you would meet the legal test. Oh, that's surprisingly, not a lot. Yeah, I mean that's like shocking to me. Because if you think about anybody that had any congregate kind of environment like you if you were running an after school program or a, you know, dining hall. I mean, even a thrift shop. It just seems to me that you, you could easily find 10% of an impact. Yeah, certainly. And yeah, it's truly and oftentimes we look to find some metric that we can use to support that argument. So, you know, if, like you mentioned, if you could look at number of meals served, you could look at number of residents in your housing program, number of students served, something like that to really prove out that 10%. Because it is a little bit of an amorphous subjective idea, you know, 10% of your ability to provide services. But if you can show that and oftentimes nonprofits do track metrics like that sort of like a measure of progress. Then you have a pretty solid argument. Okay, I'm going to throw a curveball at you because we've been talking about this in the previous week. What I mean so many nonprofits had to completely suspend their volunteer programming. Could you factor that in when you, when you would say, look, you know, we used to take so many volunteers and volunteers are the backbone of our labor. And yet we had to push them away or discontinue some major functions. Could you factor that in as well? Yeah, absolutely. You could, you know, you would likely want to look at your number of volunteer hours in your pre-pandemic operations. So probably 2019. And then compare your volunteer hours during the relevant quarters during the pandemic to say, look, we had this way more than 10% decline in our volunteer hours. And it affected our operations in such a way, you know, because this is where I think the narrative part of the, you know, each organization's COVID story really comes into play and is really important to support their partial suspension argument. So, you know, when you're working with an advisor, it's really important that you make sure somebody is sitting down and taking the time to listen to your COVID story. And, you know, the way that you needed to change your operations and the way that that impacted and changed things. And volunteer hours are certainly very significant for many nonprofits. Great question, Julia. I'm curious too, do we need to show as many decrease of this 10% in like all of the categories? Or is that volunteer component enough? Or is it almost like the more decreases you can show to your operational impact, the greater the refund? So that's a great question, Jared. So actually, I mean, the more the better, of course, if you have as many supportive arguments as you can, it is going to be great to really establish that partial suspension. But the way that it's written and the IRS has submitted some guidance that that sort of supports this, what we can do is look at a more than nominal segment of your operations. And the IRS has defined that as at least 10% of your revenue or service hours has to be dedicated to this one segment. It's childcare. You know, if you can show that 15% of your employee service hours in 2019 quarters were dedicated to childcare, and you had an impact to that segment, and you had that 10% reduction in your ability to provide those childcare services, then that that sort of wraps up the argument and supports that partial suspension. Okay, well, thank you for that. I find this fascinating, but I also find it mystifying and you use the word advisor, and I want to spend the last amount of time that we have on this because I hear so many issues coming about that involve, you know, the legal aspect, the accounting compliance. And a lot of times I think nonprofits are like, well, we, we already do that because of grants and surely we can do this ourselves, right. So I'd love for you to talk to us, you know, put your legal hat back on and say, how, how does this work? And is this something we can do ourselves or should we really find that that Sherpa, if you will, to help us guide through the process. Yeah, so oftentimes we hear from nonprofits that, you know, they spoken with their accountant with their CPA and they told them that this is something they don't do. It's too much work. It's very, very specialized, very nuanced. And so, you know, that's why firms like ours do exist. But when you're looking for an ERC advisor, you know, I would say, you know, Jared, I love non-profit nerd. I love that name. I would say look for the nerds, right? Look for a firm that's led by CPAs and attorneys rather than a firm that's led by, you know, a marketing and sales arm or department. You know, you want CPAs and attorneys who are supported by data analysts and payroll specialists who just really know what they're talking about. And so that's going to be the biggest, the biggest thing I would say when looking for an ERC advisor. That's really important. One of the things I wanted to ask Victoria, and I might have cut you off on your train of thought, but the cost associated with this, because in the rumor mill, I've heard again, right, another board chair say, oh, we can get that done for free. I know a buddy, you know, I have a friend in my Rolodex, if you will, that said that they would do it pro bono. How is that showing up in this conversation? Yeah, so Jared, I've heard that too. And, you know, certainly that is a case by case situation. You know, oftentimes that will be something that some firms can do. You know, sometimes also some CPAs and accounting firms can do it for the organizations they work for themselves. But when it comes to fees, you know, this is something I think that everyone needs to look out for as well as a red flag. You know, if you're working with a company that's trying to charge you somewhere, you know, 20 to 30% of the credit as their fee. You know, that's a little bit of a red flag. That's, it's an exorbitant fee. You want to look for, you know, obviously the firm is doing work. If they're looking for a fee, it should just be something reasonable, certainly. So that's definitely something to work for. Also, just as another now we're talking about red flags. You know, if you're speaking with a firm that's guaranteeing you eligibility in under 10 minutes without truly asking the right questions and truly looking at your documents. That's certainly a red flag as well. This, like I mentioned before, this is a very nuanced test. And especially as nonprofits, you know, with that being so risk averse you really want to be working with somebody who's taking the time to gather all the facts to really understand your story really understand your numbers and and really do the work. I love what you said earlier is like you really want someone that will listen to your covert story. Yeah, we all have one. Yeah, we all have one. Yeah, and so a large part of my day every day is dedicated to doing that because it is part of that legal test. And I work, you know, in the legal side of the house. And truly, I mean, COVID was such a difficult time for so many businesses and organizations so it's a little hard sometimes for people to think back to that time and, and, you know, when they sit down and take the time, because when they're in it they were sort of just doing it making decisions that on the fly and just making it work. But when they sit there and think back about it and start talking about it I feel a little bit like a therapist sometimes because, you know, to take the time to think about it just everyone started started saying wow we. Wow, we really look at what we did it was really incredible. So it was a really difficult time. I love that you said that because that's one of the magical parts. And sometimes I think it gets us into trouble and then on profit sector is that we're it's very easy for us to get into the middle of the storm and then move right on and the reflection piece and how that that forms our patina is lost right and so I can see where this is a challenge for a lot of organizations. Also, we've had a huge turnover and staff. I mean recently we had a guest on that talked about, you know, the shortage in accounting and the changes in accounting. How hard is this to do if you don't have staff that was actually in service at the time when this happened. Can this be done in a forensic matter, or is that just going to make things a lot harder. So the standard document request that's needed to do the calculation and do all the work should be stuff that just comes right off the shelf. Okay. So, you know, it shouldn't be too hard for somebody who's just stepped into the role to pull the information that's needed. Where we do run into issues sometime when there's a lot of turnover is when it comes to that operational test, because we really want to, I mean, ideally you want to speak to somebody who was boots on the ground there every day and can really give you all the details as to all those operational changes that were made. If that person's not there, and we got a whole new staff and nobody really knows what was going on then that can pose a little bit of an issue. Yeah. I'm curious, Victoria, does the board play a role in this at all. I mean I'm really curious, especially starting out right like is this something that the treasurer needs to be a part of or the board chair. What involvement do you have from that level. So, typically when we, if we do end up engaging with the board, it's towards the end of the process, you know, you know, before the final sign off on everything. Like I mentioned before, a lot of times they have questions everybody wants to be really comfortable with this oftentimes board see this as something that's risky. So, you know, that conversation does happen at that time. So, we have stages of engagement and the process, you know, we're typically working with the CEO, the CFO, and then just different department heads who can give us the information that we need to complete our work. Amazing. So, one last question. I've got to ask this and we don't have much time left, but could you give us kind of like an idea for the size of an organization. Like, if you really only had like less than five employees, would this make sense? Or do you really need to be that 50 plus 100 plus, you know, 500. What, what, what is your sensibility of this. You know, I would say that it really can be significant for even very small, small organizations with a small number of employees. You know, obviously, as those employee accounts go up, the credit can become really quite significant. But if you had W2 payroll during the pandemic, you can qualify for the ERC. So I would say, and especially for those smaller organizations, you know, even a relatively smaller amount of money can really be quite impactful. So, so I think it's worth looking into. Yeah, I love it. Well, I'm sorry, Jerick, go ahead. Victoria, you shared with us about an organization in California, but I don't believe you're in California. So do you serve across the nation then anyone listening or says, I want to know more or oh gosh, I thought my timeline had run up. Maybe I do want to contact Victoria. Do you serve all 50 states? Yes, we do. We work. I am located in South Carolina, but I am on zoom all day long with organizations and businesses all over the country from, you know, Hawaii to Maine. So, so glad to hear that. Yeah, and to know that again, you know, we originally met in Nashville, another guest Julia from the race conference there that one cause held in Nashville. So thank you Victoria Beck, general counsel regulatory compliance at easy dash ERC. For those of you listening, check out the website, it is easy dash ERC.com. You can find out some information now Victoria mentioned a couple of deadlines coming up. They're not until April so you still do have a little bit of time but that runway is coming to an end at some point but I'm really glad to know that it's not over because again I really thought like this ship has sailed for a lot of organizations and I think a lot of organizations probably have that same mentality. So thank you for still shining light on this possibility. My pleasure. Thank you so much for having me. Oh, it's been really, really interesting. And I think, you know, it's, it's, is Jared and I often say it's, it's the talent of the people surrounding you that helps you get through your journey and the nonprofit sector, you know, we can't do it all ourselves. We've got to, you know, ask for help and we've got to rally the troops of the professionals around us. And this, I think Jared is another example of that. So again, I'm Julia Patrick, CEO of the American nonprofit Academy been joined today by the nonprofit nerd herself, my nonprofit nerd, but she can be your nonprofit nerd too. Jared, our ransom. Hey, we have amazing partners that are with us day in and day out more than 900 episodes. And they include Blumerang American nonprofit Academy, your part time controller, nonprofit thought leader, fundraising Academy at National University, staffing boutique, nonprofit nerd and nonprofit tech talk. These are the folks that join us day in and day out so we can have conversation conversations like we've had with Victoria today. All right, ladies, we end every episode with this message. And it goes like this to stay well, so you can do well. We'll see you back here tomorrow. Thank you so much, Victoria.